Level 2

Question

civilian who worked in combat zone

Forum|Forum|6 years ago
March 1, 2020
19 replies
61 views

My client, a retired armed forced veteran, worked as a civilian in a combat zone and received additional pay due to the imminent danger. He qualifies for the combat-related tax benefits. Do I simply adjust his W-2? Or how do I denote this in ProSeries so that the taxes are correct and can be e-filed? Can this be done in Basic or do I need to convert it to the Professional series?

ProSeries Basic

This topic has been closed for replies.

T

Terry53029

Intuit Community Champion

I see this from IRS :

If you are a member of an organization directly supporting military operations and working in a combat zone, you may be eligible for a tax extension. See link:

https://www.irs.gov/individuals/military/eligibility-for-military-tax-benefits

Civilian Employees
Contractors
Red Cross Members
Can you provide a official reference that his pay is exempt from taxes

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cstockAuthor

Level 2

As far as the pay, it is denoted separately on his paystubs for the weeks of work in the combat zone. It is not, however, denoted differently on his W-2.
On the IRS website, it instructs one to write in red at the top of his return "Combat Zone" as well as any IRS letter that should follow asking for a review. I assume they must mail in the tax return.

itonewbie

Level 15

To exclude the income under §112, the compensation received must be for active service in the combat zone as a member of the United State Armed Forces.

§1.112-1(a)(4) goes on to stipulate compensation paid to your client as a civilian is not be eligible for the exclusion:

Compensation paid to civilian employees of the federal government, including civilian employees of the Armed Forces, cannot be excluded under section 112, except as provided in section 112(d)(2) (which extends the exclusion to compensation of civilian employees of the federal government in missing status due to the Vietnam conflict).

---------------------------------------------------------------------------------Still an AllStar

C

cstockAuthor

Level 2

https://www.irs.gov/newsroom/combat-zones

He is direct support services for a contracting agency. But how do I modify his income correctly in ProSeries? Has anyone had this situation in the past?

itonewbie

Level 15

@cstock wrote:
https://www.irs.gov/newsroom/combat-zones

He is direct support services for a contracting agency. But how do I modify his income correctly in ProSeries? Has anyone had this situation in the past?

The article you cited does not say anything contrary to what I stated. How did you read from the article your client will qualify? If you try to claim the exclusion, you could be subject to preparer penalty for taking a position contrary to the statute and expose your client to unnecessary P&I.

---------------------------------------------------------------------------------Still an AllStar

RollTide68

Level 7

Your client is NOT eligible for the combat zone tax exclusion!

Only members of the military are eligible.

BobKamman

Level 15

But a guy at work did it, and IRS allowed it. Well, at least they didn't catch it.

Reminds me of the days when meals at the firehouse were deductible because everyone else could do it.

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Brent1969

Level 2

I think this will answer the question.

https://www.irs.gov/newsroom/new-law-makes-clear-combat-zone-contract-workers-qualify-for-foreign-earned-income-exclusion

https://www.irs.gov/forms-pubs/about-form-2555

FORM 2555 or 255-EZ

sjrcpa

Level 15

That's foreign earned income exclusion, not combat zone exclusion.

The more I know the more I don’t know.

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Terry53029

Intuit Community Champion

@cstock @sjrcpa @BobKamman see this link:

https://www.irs.gov/newsroom/new-law-makes-clear-combat-zone-contract-workers-qualify-for-foreign-earned-income-exclusion

itonewbie

Level 15

@Terry53029 wrote:

@cstock @sjrcpa @BobKamman see this link:

https://www.irs.gov/newsroom/new-law-makes-clear-combat-zone-contract-workers-qualify-for-foreign-earned-income-exclusion

@Terry53029 That's for §911 but the original and latest posts were about §112.

---------------------------------------------------------------------------------Still an AllStar

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Terry53029

Intuit Community Champion

@itonewbie The original poster asked about tax benefits for contractors, and that is what I was replying to.They do qualify for "TAX BENEFITS" which according to IRS:

New law makes clear: Combat zone contract workers qualify for foreign earned income exclusion

New law makes clear: Combat zone contract workers qualify for foreign earned income exclusion

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